Britons invested more than £10 billion in ethical funds for the first time last year.

Figures released today by Co-operative Financial Services reveal that in 2004 a total of £10.6 billion was placed in ethical investments or deposited with ethical banks.

This represents an 18 per cent increase on the previous year’s figures.

“This a major milestone for the UK’s socially responsible investments sector and underlines how UK consumers are increasingly thinking about how they can have influence as ethical investors,” said David Anderson, chief executive of Co-operative Financial Services.

“It took 15 years for the UK’s socially responsible investments market to breach the £5 billion mark but just another five years for it to double to over £10 billion. All the indications are that this accelerated growth will continue going forward.”

And the appetite for ethical funds is high in the UK.

Friends Provident has found three in four Britons under-45 say they want their savings and pension money to be invested ethically.

Last year £5.5 billion was invested in ethically screened funds, while another £5.1 billion was deposited in ethical banks and credit unions, according to Co-operative Financial Services.

And F&C Asset Management points to data showing money invested ethically can produce returns at least equal to less scrupulous investments.

Its ethical Stewardship Income Fund has been one of the best performing UK equity income funds over five years, F&C points out.

Moreover, of the 12 consistently top performing funds, the Stewardship Income Fund was the least volatile.

“There is a widespread perception that if you invest in an ethical fund, which avoids certain types of companies, then it is somehow bound to cost something in terms of performance,” said Jason Hollands, head of communications at F&C.

But this is not the case, as ethical funds are not governed by the same constraints on investments that many funds are.

“The message is simple: ethical investors can have their cake and eat it,” he concluded.